Melissa's Leadership Journey

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Nordstrom

Nordstrom provides an example of a company that is great for those who are motivated by external factors (e.g. money) and fierce competition. Is the system bad? Well, that depends on who you ask: some employees say that they love their job at Nordstrom while others (including the Unions) think that the system is unfair and promotes illegal practices.

Since the department store’s inception as a shoe store in 1901, the company has seen a lot of growth as it has expanded to include many other items and has stores all around the country. Nordstrom’s success is attributed to its reputation for providing above and beyond customer service. Nordstrom employees have been known to deliver items to customer’s houses, go to other nearby Nordstroms to pick up items for customers, and write thank you notes for purchases. What drives this type of above and beyond behavior in Nordstrom employees? It is a system that provides commission based on a sales per hour ratio, where if the employee exceeds that ratio they can make upwards of $80k a year, though the average salary is $24k. This means that employees have to compete with one another, creating an agressive environment amongst team members. It also encourages employees to perform certain tasks that are not directly related to selling off the clock, such as merchandising, sending thank you notes, attending store meetings, and restocking merchandise. Although Nordstrom does not tell its employees to do these tasks off the clock due to the legality of the situation, it is implied through the system. Employees do not want to waste their time on the clock restocking merchandise because it means they aren’t selling, which hurts their sales per hour ratio.

Nordstrom’s reponse to the situation is to say that these tasks are all part of “completing the sale,” which is compensated through their commission policy rather than simply working overtime. This assumes that the employee exceeds their sales to hour ratio in order to get the commission. If an employee does not exceed their target, they only receive their base pay, which means they worked off the clock and were not compensated for through overtime or commission. Not to mention that not exceeding one’s target has other consquences as well, such as decreased hours and less desirable hours. This unwritten policy forces people out of the company. They weren’t meeting their target to begin with, so how would getting less hours or non-peak hours help them achieve their goals?

In addition, Nordstrom says that their system promotes teamwork, which is hard to believe considering employees have to compete for sales in order to exceed their target to get commission. The competition can be so fierce that employees steal credit for sales made by other employees. Competition amongst Nordstrom employees is even evident in management positions by having to participate in public goal setting/review meetings with various other managers every year.

Even though some people may like the system it does not mean that the system is good. Although Nordstrom may not have explicitly promoted these practices, it was known and evident through the ranks that this was how the company operated. Nordstrom allowed its employees to work off the clock and encouraged their employees to compete against one another with commission based incentives. I would suggest that Nordstrommake systematic changes where they reevaluate their pay system as well as how hours are classified/recorded.